L&T

Larsen & Toubro (L&T), for Q4FY17 reported a 28% (YoY) jump in consolidated net profit at Rs.3180 crore but this was more on the back of higher topline – 12% increase in income from operations at Rs.36,828 crore. The company’s order book in Q4 was up 9.5% at Rs.47,300 crore, driven mainly by domestic sector as exports dropped 35%. What really helped boost the net profit was the Rs.83 crore profit it reported from JVs and associate companies, which in Q4FY16 had shown a loss of Rs.333 crore. 18% of the increase in net profit can be attributed to this contribution.

A 67% drop in tax expenses at Rs.337 crore also helped but this was nullified to some extent on the exceptional loss of Rs.281 crore. Noteworthy – finance cost was down 32% at Rs.297 crore due to loan repayments & efficient fund management.

L&T’s EBITDA fell 4% at Rs.4335 crore while margins declined 190 bps to 11.8%. This can be blamed fair and square on its Infrastructure segment which reported a 10% drop in EBIT due to the increased expenses on account on delays in commencement of few projects and stay on some. Infra segment contributes 45% to total revenue.

Its consolidated order book at end of FY17 was at Rs.2.61 lakh crore, a growth of 5%. Once again, for this order book to translate into revenues, execution is the key like always.

The market is beating the stock down because irrespective of the jump in bottomline, it missed its own guidance – it had estimated a 10% increase in revenue for FY18 but in reality it grew 8% and order inflow guidance was given at 10% but it rose 5%.

This has not deterred the management from being robust about FY18 where it has guided a 12% growth in revenue and 12-14% increase in order inflows. The sweetener along with the results was a 1:2 bonus.